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PP RUEHWEB

DE RUEHJB #0626/01 2431024
ZNY CCCCC ZZH
P 311024Z AUG 07
FM AMEMBASSY BUJUMBURA
TO RUEHC/SECSTATE WASHDC PRIORITY 0540
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY

C O N F I D E N T I A L BUJUMBURA 000626 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR AF/C 
 
E.O. 12958: DECL: 08/31/2017 
TAGS: BY PGOV PINR PREL
SUBJECT: BURUNDI MAKING EFFORTS TO MEET IMF DEMANDS 
REQUIRED FOR BUDGET SUPPORT 
 
REF: BUJUMBURA 564 
 
Classified By: Ambassador Moller for reasons 1.4 b and d. 
 
¶1. (C) SUMMARY: Local International Monetary Fund (IMF) 
representative Israel de la Piedra met with Ambassador Moller 
on August 30th to discuss the Government of Burundi's (GOB) 
progress on meeting short term IMF goals required for funds 
dispersal.  De la Piedra expanded on actions undertaken to 
date by the GOB, including shortcomings and achievements.  He 
noted that the GOB is making measured progress in resolving 
the Interpetrol scandal (reftel) and making token gestures 
for demobilization, but is not moving forward with Ministry 
of Finance reforms.  He continued that the IMF will likely 
ask the GOB to scrap the current budget and find intermediate 
financing while a new budget is formulated.  De la Piedra 
emphasized that a new budget would include several 
politically unpalatable items, but that each of these issues 
are critical to Burundi receiving IMF budgetary assistance. 
END SUMMARY 
 
¶2. (SBU) In an August 30 meeting, Burundi IMF representative 
Israel de la Piedra briefed Ambassador Moller on the 
Government Burundi's (GOB) progress on meeting immediate IMF 
stipulations required for its continued budget support.  IMF 
approval will allow, he said, for the release of over USD 90 
million in IMF, European Commission, and other donor funds. 
After a second IMF budget review in July exposed serious 
flaws in the GOB budget, including alleged double payments 
for hazy, years old obligations to petrol company Interpetrol 
and a 34 percent increase in salaries for government workers 
promised by President Nkurunziza, IMF officials demanded the 
GOB take certain steps to correct the irregularities.  De la 
Piedra told Ambassador Moller that the GOB is making measured 
progress on meeting the goals, but they are not out of the 
woods yet. 
 
¶3. (SBU) De la Piedra explained that Burundian President 
Nkurunziza wrote a letter to the IMF managing director 
outlining in generic terms the steps the GOB is undertaking 
to meet IMF demands.  According to De la Piedra, the letter 
was less detailed than the bank would like, but that the IMF 
in Washington appreciated the effort.  The IMF originally 
asked for the GOB to produce an action plan for recovering 
the money paid to Interpetrol.  The action plan would be made 
public and include judicial strategies designed to recoup the 
misappropriated  payments.  To date, President Nkurunziza has 
only made passing public references to the plan; however, De 
la Piedra stressed that the GOB has initiated other measures. 
 
 
¶4. (C) Complicating the seizure of Interpetrol assets, 
according to De la Piedra, is the fact that the petrol 
company supplies between 50 and 80 percent of gasoline that 
comes into Burundi.  When President Nkurunziza began halting 
Interpetrol trucks and their fuel in an attempt to put 
pressure on the company, fuel shortages occurred around the 
country.  However, in a deal with Interpetrol, the GOB has 
solidified a hold on USD 6 million in Interpetrol funds 
frozen in a local bank, and also persuaded Interpetrol to 
offer as collateral 25 properties valued at USD 16 million 
while the alleged double payment issue is resolved, according 
to De la Piedra 
 
¶5. (SBU) The IMF has requested modifications to current GOB 
regulations that allow the Minister of Finance to authorize 
extra budgetary allocations with essentially no redundancy to 
protect against malfeasance.  Unfortunately, the GOB is 
unable to overcome its current political stalemate to vote on 
any law, including one to reform Ministry of Finance 
regulations.  De la Piedra expressed frustration at GOB's 
inability to reconcile this matter. 
 
¶6. (C) De la Piedra noted that Interpol has reportedly issued 
warrants for the arrest of former Ministers of Finance Denise 
Sinankwa and Athanase Gahungu.  He called this a step in the 
right direction to determine who is ultimately responsible 
for the missing funds.  Additionally, De la Piedra affirmed 
the qualifications of the new Governor of the Central Bank, 
Gaspard Sindayigaya, stating that Sindayigaya has the 
requisite experience and skills to return the bank to a 
credible and reliable institution. 
 
¶7. (SBU) The IMF also stipulated the GOB step up their 
demobilization efforts in a move to reduce wage costs 
reflected in the budget.  De la Piedra observed that wage 
costs for the GOB are upwards of 13 percent, while the 
average for most developing countries is six to seven 
percent.  President Nkurunziza has indicated the GOB will 
demobilize 1500 police and soldiers in the near term, 
 
alleviating some pressure on the budget.  While acknowledging 
the good intentions of the President, De la Piedra cautioned 
that this action has occurred too late in the budget cycle to 
grossly affect budget operations. 
 
¶8. (C) De la Piedra concluded the meeting by saying that the 
political situation at the IMF is delicate, with several 
members of the team openly weary of the continuous corruption 
and others more sensitive to political considerations.  He 
added that the IMF will likely recommend that the GOB scrap 
the current budget and start fresh in 2008, as chances for 
approval of the current budget remain slim.  De la Piedra 
called the elimination of the salary increase and a tax hike 
on sugar, beer, and gasoline essential components of a new 
budget. He acknowledged how difficult that will make the 
political situation for the GOB, but countered that it comes 
down to the GOB receiving USD 90 million in budget support. 
De la Piedra said, if the GOB is unwilling to make the 
difficult choices, then they simply won't receive budgetary 
support. 
 
¶9. (SBU) COMMENT: Although his rhetoric was candid - 
sometimes harsh - De la Piedra maintained a balanced view - 
neither optimistic or pessimistic in his assessment of the 
current budget crisis in Burundi.  He mentioned that there 
are ways around a temporary delay in funds dispersal, 
including acquiring funds on the open market and then 
repaying them in three months.  De la Piedra seemed willing 
to fight for Burundi within the IMF establishment, and 
expressed his increasing affinity, as well as frustration, 
for Burundi.  Post will continue to urge the GOB to work 
closely with the IMF to insure that miscommunication is not 
the stumbling block that derails Burundi on its bumpy road to 
stability. END COMMENT 
MOLLER